Ontario's Chief Justice Warren Winkler speaks on Tuesday, April 24, 2012, in Toronto at the start of mediation over distribution of almost $9 billion in assets from bankrupt Nortel Networks. (Colin Perkel/THE CANADIAN PRESS)

Ontario's Chief Justice Warren Winkler speaks on Tuesday, April 24, 2012, in Toronto at the start of mediation over distribution of almost $9 billion in assets from bankrupt Nortel Networks.(Colin Perkel/THE CANADIAN PRESS)

Justice

Streetwise

Market View

If the parties resort to litigation, Chief Justice Warren Winkler told a room full of high-priced bankruptcy lawyers, it would deplete much of the money now available to creditors, who include pensioners of the once high-flying high-tech company.

“This would be a catastrophic outcome for some, and unsatisfactory for most of those affected by this case.”

The bankruptcy proceedings over Nortel's business lines and intellectual property involve companies in 20 countries on every continent except Antarctica.

Besides Nortel pensioners, others looking for a share of the assets include disabled former employees, bond holders, trade creditors and governments. Legal proceedings are underway in the U.S., U.K., and Canada.

“The Nortel insolvency is one of the most complex trans-national legal proceedings in history,” said Mr. Winkler, who was appointed mediator by courts in Ontario and Delaware.

“The complexity of this case would make even a conflict-of-laws professor cringe.”

Winkler acknowledged the hurdles he faces, especially since the value of the claims far exceed the residual assets. In addition, two previous efforts at mediating a settlement failed.

Originally founded in Canada in 1895 as an equipment provider for Canada's telephone system, Nortel expanded into a global digital and network powerhouse starting in the mid-1980s.

By 2000, Nortel had $30-billion in annual revenues and employed nearly 93,000 people. The empire began crumbling with the burst of the “dot-com bubble” in early 2001.

In 2004, it was forced to restate its financial results due to accounting irregularities and became the target of shareholder lawsuits. Creditors finally pushed the company into bankruptcy in 2009.

Hard-hit Nortel pensioners, whose pensions have been slashed by 30 per cent in some cases, have resorted to demonstrations, legal action and pressing for tougher legislative protections.

Because no single court has the ultimate authority over the issue, Winkler warned that litigation could lead to conflicting results and endless appeals.

As a result, he said, mediation is essential to a resolution.

He promised a fresh approach — something different from gathering all the parties together to try to hammer out a deal. Instead, he pledged to meet with the various parties individually in an effort to find common ground on which to build a settlement.

Three of Nortel's former senior executives are currently on trial in Toronto on fraud allegations.

Former CEO Frank Dunn, ex-CFO Douglas Beatty and ex-controller Michael Gollogly have pleaded not guilty to the charges related to allegedly manipulating Nortel's books and defrauding the company of $12.8-million in bonus payments.

Restrictions

All rights reserved. Republication or redistribution of Thomson Reuters content, including by framing or similar means, is prohibited without the prior written consent of Thomson Reuters. Thomson Reuters is not liable for any errors or delays in Thomson Reuters content, or for any actions taken in reliance on such content. ‘Thomson Reuters’ and the Thomson Reuters logo are trademarks of Thomson Reuters and its affiliated companies.